Research of the gender pay gap in New Zealand

The research report Empirical evidence of the gender pay gap in New Zealand (led by Professor Gail Pacheco from AUT) tells us about the factors behind the gender pay gap and helps us focus our efforts. It is the first comprehensive update of the factors behind the national gender pay gap since 2003.

The research uses New Zealand Income Survey data from 2015. The sample size (13,737 respondents) allows for results of statistical significance to be produced and the multiple methods increase the robustness of the findings.

What does the research find?

The research finds that the great majority (80 percent) of the gender pay gap is now driven by harder to measure factors, like conscious and unconscious bias that impacts negatively on women’s recruitment and pay advancement, and differences in choices and behaviours between men and women. This is using the Oaxaca + correcting for selection bias technique (page 20 of the report).

The research finds that the proportion of the pay gap that is unexplained becomes larger and more significant for female employees on higher wages. For women on lower incomes, factors such as type of work, family responsibilities, education and age remain important.

The research also finds the relative size of the gender pay gap increases for female employees on higher incomes. There is a smaller gender pay gap between male and female employees on the lowest wages. The Ministry thinks a reason for this is that lower paid occupations have narrower pay bands and therefore less scope to pay men and women very differently. The gap widens to approximately 20 percent among those on the highest wages.

What else could be contributing to the “80 percent” finding?

The research found that 80 percent of the gender pay gap was “unexplained”. The Ministry for Women defines the unexplained portion of the gap as “unconscious and conscious bias, and differences in behaviours and choices between men and women”.

The unexplained portion could include the following.

Bias

Bias makes it difficult for women to adapt and succeed in workplaces, because it is extremely difficult to detect, by those who benefit and by those who are disadvantaged. It influences decisions on hiring, promotions and setting salariesas well as small day-to-day behaviours (like who is called on to offer an opinion or undertake challenging tasks, and whose contributions are positively acknowledged in meetings).While discrimination is against the law, bias can affect decisions people make in ways that they’re not aware of.

Differences in behaviours and choices

A greater need for flexible working conditions leading to wage differences

Women are more likely than men to need workplace flexibility as they are more likely to be the primary caregiver in families. This can constrain women’s choices more than men’s choices.

Research by Goldin (2014) argues that a key driver of gender pay gaps for higher-income workers is how firms reward individuals who prioritise workplace flexibility. Goldin’s research indicates that “flexibility” can come at a high price in terms of earnings.

What women receive when they negotiate pay

Research also indicates differences in the outcomes men and women receive when they bargain. Recent research undertaken in Australia from Cass Business School, the University of Warwick and the University of Wisconsin (2016) shows that women ask for wage rises just as often as men, but men are 25 per cent more likely to get a raise when they ask.

Some research indicates that men and women have different approaches or willingness to negotiate pay and conditions. Babcock and Laschever (2004) found that women were less likely than men to negotiate over their own salaries – either starting salaries or increments.

Factors unable to be captured in the data

The unexplained portion can also include any factors not captured in the survey data, such as differences in the type of qualifications e.g. differences between the degrees that women and men undertake on average.

Vertical segregation (fewer women in senior roles) is likely tohave some effect on the unexplained portion. For instance, while ‘managers’ are captured in the data as an occupational group, there will be wide differences in level and wages inside this broad grouping.

Similarly, the longer-term effects of factors such as parental status and part-time work on women’s wages are unlikely to be fully captured in the research, as the research is taken at a point in time. The Ministry has commissioned further longitudinal research that will explore the effect of parental status over time.

This particular research could not test for the effect of undervaluation of female-dominated occupations which can derive from historical or current gender discrimination.

Other research

In May 2018, the Ministry for Women released Parenthood and labour market outcomes, an initial exploration of what we can learn about the drivers of the gender pay gap in New Zealand from combining administrative wage data, birth records, and survey data on hours worked and earnings. The particular focus of this research was the role of parenthood penalties in this pay gap.

A recent report Effect of motherhood on pay found there was a 17 percent pay gap between what mothers and fathers earn in the workforce. The report shows that pay gaps between mothers and fathers are only one contributor to the overall national gender pay gap.